Eulogy for semiconductors in Canada

The last two nails were hammered into the semiconductor business in Canada recently with the acquisition of GENNUM  by Semtech and ZARLINK by Microsemi (both out of California). This follows the recent acqusition of SiGe Semiconductor by Skyworks and earlier TUNDRA by IDT. For all practical purposes we are left with no significant size Canada-based and Canadian controlled semiconductor company in the country – back to chopping woods, digging minerals and pumping oil (not that there is anything wrong with that…)
Maple leaves falling
Oh, sure, there are still some left-overs and a few pocket-size and interesting niche-y microelectronics firms but nothing of the scale that would make a difference at the national level. Does it matter? History will tell but it sure is a bit sad for those of us who were part of the ride and, well, after all, who really wants his future to be just about running a branch-plant?

Thus, appropriately here is a nostalgic look back and a brief crash course in the history of the semiconductor industry in Canada.

The beginnings of it go back to the early ’70s and the story of MicroSystems International Limited (MIL), initially a government inspired venture with Northern Telecom (Nortel). When MIL was winding up in 1974 it spun out two important seeds: Semiconductor Components Group (SCG) as part of Nortel/BNR and a pair of two budding entrepreneurs Terry Mathews and Mike Cowpland. They started MITEL whose semiconductor division (Mitel Semiconductor) later on became ZARLINK. At about the same time Wally Pieczonka and Doug Barber started Linear Technology Inc (LTI) in Burlington, Ontario which was renamed GENNUM later on. These three companies became pillars of the foundation on which pretty much all the rest (with an exception of PMC-Sierra) of Canadian semiconductor industry was built.

The golden age lasted about two decades (1980-2000) with the ’80s being particularly heady days as the industry was young and rapidly growing. When I joined Nortel’s SCG in the early ’80s as a member of its R&D team, Nortel had a vertically integrated semiconductor operation. It involved not just the chip design but also manufacturing of silicon, process and device technology, packaging, testing and design automation. The synergies in such an environment were just immense. We were doing world-class engineering and, most of the time, money was no object. As a young manager I was nevertheless able not just to collaborate but also sponsor leading-edge research at Stanford University, Carnegie Mellon and a number of Canadian schools.

In this fertile environment a number of world-class inventions and products were developed such as the CCD imagers technology by Jim White and Joe Ellul, some of the industry-first CAD tools such as AUTOLAY and SYNFUL by Stan Jedrysiak, as well as a number of first complex telecom chips that powered the digital world. Some memorable management figures from that time were Lloyd Taylor, Graham Sadler, Geoff Shrank, Dave Lawrence, Adam Chowaniec and later on Ken Bradley and Claudine Simson. Similarly Mitel Semiconductor (ZARLINK) built its own semiconductor fab in Bromont, Que and moved into the merchant semiconductor business led by Doug Smeaton, David Brown and later on Kirk Mandy. At the same time Linear Technology (GENNUM) led by Wally Pieczonka achieved a dominant world market share of 65% as a supplier of hearing aids chips.

The spillover effect of this critical mass on the broader Canadian scene was quite substantial as it fed a large thriving supply chain, stimulated world-class research at the universities including funding university Chairs (Carleton U) and spun off a number of startups. Some of the better known included Siltronics (Gyles Panther), Mosaid Technologies founded by Dick Foss and Bob Harland, DALSA founded by Savas Chamberlain, CALMOS (later on transformed into Newbridge Microsystems and finally TUNDRA, acquired by IDT) founded by John Roberts, Genesis Microchip founded by Paul Russo, and many others. Among them was ATMOS Corp which I founded in mid-nineties. There is a famous chart, created and supplied by Doyletech, showing the family tree of locally-generated technology companies and pretty much 90% of them can be traced back to NORTEL.

In the ’90s there was an important joint industry-government initiative at the time called Strategic Microelectronics Consortium (SMC) run by John Roberts. It really provided a strong boost to the growth of the fledgling microelectronics industry in Canada. In addition, the Canadian Microelectronics Corporation (CMC – currently run by Ian McWalter), mostly government funded,  was created to stimulate and support electronics research in Canadian universities.

Unfortunately most of it started to slow down around the year 2000. After a good, long 40 year run, the semiconductor industry was maturing (not unlike what happened to the automotive industry). Some players, such as Mitel Semiconductor (ZARLINK), caught the change and transformed themselves from captive suppliers into merchant semiconductor players. Unfortunately, the largest of them, Nortel’s SCG, failed to achieve that, mostly due to lack of management leadership. As a result, this primary engine of semiconductor growth and expertise in the country was sold off to STMicroelectronics and following a classic pattern drifted away never to be seen again!

There is no doubt in my mind that the failure of the leadership of Nortel’s SCG at that time to spin off its microelectronics business as something like “Telecom Semiconductor Inc”, was a main trigger for the subsequent decline and slow disappearance of the semiconductor industry in Canada. We have simply lost critical mass. A number of talented highly specialized engineers and researchers moved away in search of the jobs in California’s Silicon Valley and other places around the world. It’s a pity but that is what lack of foresight, vision, circumspection does to a country…

For a little while though “Times they were a-changing” we got a bit of a second backwind towards the end of the ’90s with the days of mushrooming semi start-ups nourished by the multi-million dollars investments from the burgeoning VC firms. This was the era of a new type of semiconductor company, no longer large capital intensive and vertically integrated, but so called fabless semiconductor company. Among the better known started at that time were: SiGe Semiconductor (founded originally by John Roberts), Skystone (Antoine Paquin & Stefan Opalski), Solidum (Feliks Welfeld), Quake (Dan Trepanier), ATMOS (Paul Slaby), Lumic/Atsana (Luc Lussier), Philsar, Extreme Packets and IceFyre. All of these companies have been acquired since and are mostly gone from the Ottawa scene.

So, what have we got left?
What is the landscape after the battle? What we have is a number of small and medium size firms built up on the remnants of the previous firms. They are mostly profitable and sometimes hugely so. They usually do not forge new product frontiers or aggressive innovation. Instead they tend to provide services and capitalize on the know-how and expertise developed by their predecessors.

The most successful is definitely a cluster of what one could call “Semiconductor IP protection and licensing”. This includes:  MOSAID  (recently renamed “Conversant Intellectual Property Management” was founded by Dick Foss, later on run by George Cwynar and currently by John Lindgren), Wi-LAN (Jim Skippen), UBM TechInsights (previously Semiconductor Insights – a spin-off from MOSAID built-up by Terry Ludlow and Doug Smeaton), Chipworks (Terry Ludlow), Global Intellectual Strategies (GIS – Pierrette Breton). It is interesting to note that all of these companies can be traced back to MOSAID – clearly Dick Foss must have done something right laying down this foundation!

In addition, there is a sprinkle of design services and IP product companies such as TSMC Design Centre (as a result of EMT (Sreedhar Natarajan) acquisition with its origin in ATMOS Corp), Kaben Wireless Silicon (which we have built-up significantly during my recent 3 year CEO run), SiDense (founded by Wlodek Kurjanowicz and run by Xerxes Wania), CogniVue (with its origin in Lumic/Atsana and currently run by Simon Morris). Outside of Ottawa the significant players include PMC-Sierra in Vancouver, DALSA, Fresco Microchip (Lance Greggain) and ViXS (Sally Daub) in the Toronto area. The industry has its representation through the ITAC SMC Council currently coordinated by Iain Scott.

So, now, what does the future hold for semiconductors in Canada?
The business has changed and the glory days appear to be over and are not likely to come back. It is a different world now and no amount of nostalgia is going to change that. In particular, the old business model of fabless semiconductor companies is, for all practical purposes, dead,  when it comes to start-ups and emerging companies (you can find more about it in this presentation: http://www.design-reuse.com/exclusive/kaben/)
There is a need for new approaches that have a chance to bring significant ROI justifying investments.

Just because the old ways of doing business are no longer applicable, this does not mean there is not a need or a demand for semiconductor start-ups and their innovation – quite contrary! But the way we go about it has to be different. To avoid repeating myself, I refer you to this article: http://www.eetimes.com/electronics-news/4074052/Letter-to-the-editor-IP-cars-share-common-ground

PS
Here is a bit of an inside scoop on the Zarlink story:
And here is an info on the GENNUM acquisition:
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